MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank has increased its projection for economic expansion across developing Asia and the Pacific to 5.0% in 2026 from 5.5% in 2025, with the growth estimate for 2027 slightly rising to 5.1%, supported by robust investment, government stimulus measures, and technology exports related to artificial intelligence spending, which continue to drive regional activity, as noted in the September Asian Development Outlook, despite the forecasted moderation.
Meanwhile, the inflation forecast for the region in 2026 has decreased marginally to 4.2% from 4.3% in the July outlook, although the 2027 inflation estimate has edged up slightly to 3.5% from 3.4%, both remaining above the 3.0% inflation rate recorded across developing Asia and the Pacific in 2025. The report highlights that measures aimed at stabilizing prices have mitigated some consumer impacts stemming from high energy costs, yet elevated global energy prices continue to exert pressure on household and business expenses throughout much of the region.
The forecast underscores conflict and extreme weather events as primary risks threatening regional economies, with ongoing disruptions related to conflicts in the Middle East and Ukraine keeping global energy prices high and volatile. Additionally, a very strong El Niño could potentially diminish agricultural output and hydropower generation in affected economies, while other downside risks include renewed uncertainty around trade policies, tighter financial conditions, and a sharp revaluation of AI-related equities, as detailed in the report.
Strong upward revisions for South and Southeast Asia
South Asia experienced one of the most significant upgrades in growth projections during the September assessment, with the subregion now expected to grow by 6.4% in 2026, an increase from the 6.0% estimate issued in July, driven by strong public investment and resilient export growth in India. However, the outlook for 2027 has been slightly lowered to 6.5% from 6.7%, reflecting weaker prospects for several economies facing challenges related to trade, energy, and weather conditions.
Similarly, developing Southeast Asia received modest upward revisions for both forecast years, with growth now projected at 4.7% in 2026 compared to 4.6% in July, and 4.9% in 2027. During the first half of 2026, manufacturing and services sectors supported regional activity, although the Asian Development Bank noted that performance varied across different economies due to factors such as food and energy costs, tourism dynamics, public spending, and investment levels affecting domestic demand.
Pacific region faces a less optimistic outlook
The Pacific subregion experienced the most significant downward revisions among the areas covered, with growth forecasts revised downward by 0.3 percentage points to 3.0% for 2026 and 2.9% for 2027. Concerns about agricultural output amid El Niño conditions, ongoing disruptions in energy markets increasing costs across island economies, weak mining activity in Papua New Guinea, and subdued industrial activity in Fiji all contributed to the less favorable outlook for this region.
Meanwhile, growth in Caucasus and Central and West Asia was lowered by 0.1 percentage point for both years, with projections now at 3.7% in 2026 and 4.1% in 2027, partly due to weaker external demand. The growth outlook for developing East Asia remained unchanged in the September update. Across the broader region of developing Asia and the Pacific, recent forecasts indicate a slowdown compared to 2025, although investment, public support, and technology exports continue to underpin economic activity, as highlighted in the report.